Apple Said to Plan Online Newsstand With Publishers

The newsstand, designed particularly for the iPad, would be similar to Apple’s iBook store for electronic books, said the people, who declined to be identified because the negotiations are private. Photographer: Jason Alden/Bloomberg

Sept. 17 (Bloomberg) -- Apple Inc. is developing a digital
newsstand for publishers that would let them sell magazines and
newspapers to consumers for use on Apple devices, said two
people familiar with the matter.

The newsstand, designed particularly for the iPad, would be
similar to Apple’s iBook store for electronic books, said the
people, who declined to be identified because the negotiations
are private. The newsstand would be separate from Apple’s App
Store, where people can buy some publications now, they said.

Apple’s effort is aimed at luring more consumers to the
iPad and helping publishers sell subscriptions, rather than
single issues. The main hang-ups between Apple and publishers
including Time Warner Inc., Conde Nast, Hearst Corp. and News
Corp. are who controls data about users and how to split
subscription revenue, the people said. Pricing for subscriptions
also hasn’t been worked out.

The new storefront could be up and running within a couple
of months, although the talks are ongoing and could fall apart.
Apple may wait to unveil the initiative until they are ready to
announce the next iPad, possibly in early 2011, one person said.

“These are serious discussions about subscriptions and
advertising within newspaper and magazine applications,” said
Roger Fidler, the program director for digital publishing at the
Reynolds Journalism Institute at the University of Missouri.
“Publishers want to know who their customers are and their
usage patterns while reading.”

Fidler, who has been an adviser to publishers during the
negotiations, said he has no inside information about the
deliberations because the publishers he works with are under
non-disclosure agreements.

Apple’s Aims

Tom Neumayr, a spokesman for Apple; Julie Henderson, a
spokeswoman for News Corp.; Dawn Bridges, a spokeswoman for Time
Warner’s magazine unit; and Maurie Perl, a spokeswoman for Conde
Nast, declined to comment. Paul Luthringer, a spokesman for
Hearst, did not return a message for comment.

To support the online newsstand, Apple is developing
software to make it easier and cheaper to create digital
versions of magazines and newspapers, with extras such as high-resolution videos integrated with stories, one person said. By
offering tools to simplify the process, the company aims to
attract publishers to the storefront, the person said.

Apple, based in Cupertino, California, is also working on
server technology to keep electronic publications frequently
updated, so consumers wouldn’t have to click on a publication to
get the most recent news, the person said.

Publisher Resistance

One challenge is that publishers prefer to control
subscriber data and revenue, said Ken Doctor, an analyst with
Outsell Inc. in Burlingame, California. Apple is trying to
insert itself as a middleman that doesn’t exist in other
industries, said Doctor, who is not directly involved in the
talks. For example, Sony Corp. doesn’t demand a cut of the
revenue from television shows on its TV sets, Doctor said.

Time Warner’s Time Inc. magazine unit, which sells Sports
Illustrated and People, doesn’t plan to sign on with Apple’s
newsstand because of concerns the effort would sever ties
between the publisher and its customers, a person familiar with
the company’s discussions said.

Next Issue Media, a joint venture of publishers that
includes Conde Nast, Hearst, Meredith Corp. and Time Inc., met
this week and the discussions centered around the major magazine
publishers not wanting to agree to the current terms from Apple,
a person briefed on the conversation said.

Melissa Connerton, a spokeswoman for Next Issue Media, did
not return a message seeking comment.

It’s unclear if any publishers have signed on yet, one
person said.

Points of Friction

A point of friction has been whether Apple will collect 30
percent of publishing sales, like it does for music, games and
other applications, said Fidler of the University of Missouri.
Another issue is that Apple may not share subscriber data with
publishers, another person said. Without that data, it would be
difficult for a publisher to bundle print and digital
subscriptions.

Publishers are also talking with Google Inc. about
tailoring content for tablets using its Android operating
system, people familiar with the talks said. The competition
created by Android, which is being used in devices from Samsung
Electronics Co. and Dell Inc., could help publishers in their
negotiations with Apple, Doctor said.

Print + Video

Facing a drop in traditional readership, the publishers are
looking to tablet devices as a new way to reach customers. U.S.
consumer magazine circulation has fallen for two straight years,
according to the Audit Bureau of Circulations. Newspapers’
average daily circulation fell 8.7 percent in the six months
through March, after declining 11 percent in the prior six
months, according to the trade group.

To take advantage of the new platforms, News Corp., owner
of the Wall Street Journal, is setting up a subscription news
product specifically for tablets such as the iPad, according to
a person familiar with the plans.

One person familiar with Apple’s digital platform plans
says it is being designed to help large media companies showcase
different kinds of content -- say, Fox News television
interviews within stories from the Wall Street Journal.

In their negotiations with Apple, publishers are trying to
avoid repeating the battle of digital editions sold on
Amazon.com Inc.’s Kindle device.

Publishers criticized how much revenue Amazon was sharing
and the retailer’s policy of owning the subscriber information.
Amazon still doesn’t share information with publishers about
their customers.

“The last thing these companies want is a new middleman,”
Doctor said.

Apple fell $1.20 to $275.37 at 4:01 p.m. New York time on
the Nasdaq Stock Market. The stock has climbed 31 percent this
year.